Market Overview

Wells Fargo's Farmer Upgrades Chipotle, Says History Shows Quick Comeback Is Possible

  • Chipotle Mexican Grill, Inc (NYSE: CMG) shares have been trending south in the last three months, and have lost 25 percent since November 2.
  • Wells Fargo Securities’ Jeff Farmer upgraded the rating for the company from Market Perform to Outperform.
  • A study of previous food safety cases show that share price recovery closely tracks the company’s ability to recapture lost SSS, Farmer pointed out.

Analyst Jeff Farmer mentioned that an analysis of food safety case studies indicates that share price recoveries closely track the recapturing of the lost Same-Store-Sales [SSS]. The analysis has also showed that “the majority of restaurant concepts that have experienced a food safety issue see the return of sustained SSS growth within 12-15 months of the incident.”

Chipotle Mexican reported a better-than-guided 4Q EPS of $2.17 due to lower-than-expected non-cash based compensation. The EPS estimate for 2016 has been reduced from $12.00 to $10.04 to reflect higher G&A and marketing spend in 1H16.

Although the company is likely to incur increased costs to win back lost customers, its share price is likely to closely track “demonstrated SSS recovery, even in the backdrop of reduced near-term profitability,” Farmer wrote.

“We believe CMG shares will see both share price and valuation multiple expansion over 2016 as the concept's SSS make sequential quarterly progress back to SSS growth,” the Wells Fargo Securities report noted. Farmer expects 2Q16 to represent Chipotle Mexican’s first quarter of a “multi-quarter run” of improving sequential SSS.

Latest Ratings for CMG

Jan 2021Goldman SachsInitiates Coverage OnBuy
Jan 2021Morgan StanleyMaintainsEqual-Weight
Jan 2021Deutsche BankMaintainsHold

View More Analyst Ratings for CMG
View the Latest Analyst Ratings


Related Articles (CMG)

View Comments and Join the Discussion!

Posted-In: Jeff Farmer Wells Fargo SecuritiesAnalyst Color Long Ideas Upgrades Analyst Ratings Trading Ideas

Latest Ratings

URIVertical ResearchInitiates Coverage On310.0
PCARVertical ResearchInitiates Coverage On95.0
DEVertical ResearchInitiates Coverage On345.0
CNHIVertical ResearchInitiates Coverage On16.0
AGCOVertical ResearchInitiates Coverage On119.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at